NEW YORK |
(Reuters) - Brent crude edged up in volatile trading while U.S. crude ended little changed on Tuesday as investors eyed a U.S. Federal Reserve two-day policy meeting for any signal of a change in monetary policy.
The U.S. dollar remained under pressure on expectations that the Fed will keep monetary policy accommodative, helping support dollar-denominated oil prices that have benefited by attracting investment as a hedge against inflation.
Comments by the chief of Saudi Arabia's state-run company Aramco, who voiced concern about the impact of high oil prices on the global economy, pressured crude early on Tuesday.
The Saudi view contrasted with U.S. Treasury Secretary Timothy Geithner's remarks that oil, "at current levels, on its own, it won't put the recovery at risk.
A power outage affected operations at several refiners in Texas City, Texas, lifting U.S. gasoline and heating oil futures and supporting crude.
Brent crude for June gained 48 cents to settle at $124.14 a barrel, having bounced off a $122.78 low.
U.S. crude for June fell 7 cents settle at $112.21.
Tuesday's trading saw U.S. crude seesaw between a $111.12 low and a $112.64 peak. It reached $113.48 on Monday, its highest intraday price since September 2008, before ending the day down 1 penny.
Libya's civil war and violence-tinged unrest Syria and Yemen helped limit bearish sentiment or a price slide, keeping the potential for supply disruption in the region highlighted.
Tensions between Bahrain and Tehran escalated as Bahrain ordered the expulsion of an Iranian diplomat for alleged links to a spy ring in Kuwait.
Oil's rallies have been fueled recently by geopolitical supply worries and expectations the dollar will stay under pressure, but price pull backs have resulted from increasing concerns about the threat to oil demand from high prices.
Analysts and brokers said investors would be cautious awaiting the result of the Fed's Federal Open Market Committee meeting that started on Tuesday and will include a news conference on Wednesday.
"This week, it will be all about the Fed meeting. Volume and volatility will come back after the meeting," said Olivier Jakob of Petromatrix in Switzerland.
Both U.S. and Brent crude trading volumes outpaced Monday's depressed totals, but they remained on track to continue to lag 30- and 250-day averages, according to Reuters data.
DOLLAR UNDER PRESSURE
The euro jumped to a 16-month high against the dollar, with no respite seen for the greenback as long as the Fed lags other major central banks in raising interest rates.
The dollar index .DXY, measuring the greenback against a basket of currencies, weakened.
"Exchange rates and lack of confidence in the currency have been supportive to oil. The market is going to be cautious and wait to see if the Fed and (Chairman) Bernanke address rising energy prices and inflation," said Phil Flynn, analyst at PFGBest Research in Chicago.
U.S. OIL INVENTORIES
U.S. crude stocks jumped 4.9 million barrels last week as imports increased, the industry group the American Petroleum Institute (API) said late on Tuesday.
Gasoline stocks fell 2.1 million barrels and distillate inventories rose 1.5 million barrels, the API report said.
Ahead of the API report, a Reuters poll on Tuesday yielded a forecast for crude stocks to be up only 800,000 barrels.
Gasoline stocks were expected to be down 1.1 million barrels and distillate stocks nearly unchanged, up only 100,000 barrels.
After the API data, U.S. crude prices fell further and Brent pared gains slightly in post-settlement trading.
The U.S. Energy Information Administration's weekly report is due on Wednesday at 10:30 a.m. EDT (1430 GMT).
U.S. retail gasoline demand fell last week from the previous week, but rebounded modestly versus the year-ago period, a MasterCard Advisors' report showed.
The index that tracks tonnage hauled by trucks in the United States rose in March, but higher fuel prices threaten the growth, the American Trucking Associations trade group said.
(Additional reporting by Gene Ramos in New York, Ikuko Kurahone in London and Manash Goswami and Florence Tan in Singapore; Editing by Marguerita Choy and David Gregorio)
